WBD’s David Zaslav, Amazon’s Andy Jassy, ​​Apple’s Tim Cook Among Most Overpaid CEOs in New Study Set for SEC Disclosure Rules Shakeup

Warner Bros. Discovery Chief Executive David Zaslav earned $232 million in additional compensation in 2021, according to the latest annual ranking of the highest-paid CEOs among S&P 500 companies. Amazon, Apple, Disney and Netflix are higher in the group’s ninth report that looks beyond total pay in its own effort to quantify additional pay and draw attention to some of the key issues in the space.

Shareholder advocacy nonprofits measure compensation against three metrics: total shareholder return; the number of shares voted against the CEO’s pay package at the annual meeting; and the ratio of CEO pay to median worker pay, a gap that continues to widen. It weights the first two data points at 40% each and the salary ratio at 20% to create a ranking.

Shareholder opposition to higher pay continues to grow, but How You Sow also lists the largest mutual funds “that support overpaying most CEOs.” The research comes as a new set of SEC rules to enforce how companies disclose pay this proxy season

Companies report compensation for their top five highest-paid executives in proxy statements filed with the SEC each spring for the prior year. The additional pay report released Thursday is based on compensation for 2021, the latest available data for companies reporting a calendar year. The median salary for S&P 500 CEOs in 2021 was $18.8 million, up 21%. For As You Sow’s 100 highest-paid CEOs, the average rose 31% to $38.2 million. Those 100 saw median pay, less affected by mega-grants of stock and options, rise 8% to $23 million.

Zaslav’s salary package totals $246 million for 2021, at the top of the list. That compares with $37 million the year before and was inflated by a larger $202 million option grant related to his contract renewal.

“The headline compensation figure reflects Mr. Zaslav’s expanded employment agreement nearly two years ago to ensure long-term leadership of his combined company, Warner Bros. Discovery. Most of the headline number is theoretical as it is based on a one-time option grant that only begins to provide financial benefits to Mr. Zaslav if WBD’s stock price more than doubles,” WBD said in a statement.

His pay includes a $3 million base salary, a $13 million stock award, $22 million in non-equity incentive plan compensation (similar to a cash bonus) and a $4.4 million special bonus for leadership through Covid, launching Discovery+ and securing the WarnerMedia deal. .

The ratio of his salary to the median worker salary was 2,972 to 1. Excluding option grants, WBD noted in the proxy, Zaslav’s salary was $43 million and the pay ratio was 527 to 1.

As you mentioned 78% of institutional shares voted against executive compensation, as did 39% of reported shares. Reported shares include super-voting stock, which is used by several media companies, and shares held by CEOs and insiders. For example, you break down shares voted by institutional and financial managers.

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Amazon’s Andrew Jassy and Apple’s Tim Cook were No. 9 and No. 10 on the list with packages of $212.7 million and $98.7 million, respectively, for 2021. As you sow, their overpayment amounts are $197 million and $83 million, respectively.

Jacey’s 2021 salary includes a restricted stock award worth $212 million that vests over 10 years. The compensation committee said in the proxy that “it is important to provide clarity and stability through an award that is designed to establish a long-term owner’s vision and encourage bold, long-term initiatives, in the same way that Mr. Bezos’s shares as founders motivated him to focus on long-term, broad-based growth. Large numbers In a nod to Per, it said the award is “intended to represent the majority of Jaycee’s compensation for the coming year.” (Amazon founder Jeff Bezos steps down as CEO in the summer of 2021.)

Apple’s fiscal year ends on September 30. For FY 2022, Cook took home $99.4 million, according to the latest proxy filed in January, similar to his salary for FY 2021. Apple’s compensation committee said it plans to cut Cook’s target pay by more than 40% in the current fiscal year, 2023, after “backlash” from disgruntled investors, the proxy said.

Shareholder votes on pay are “advisory” or non-binding, but too many votes against is not a good optic.

Disney was No. 21, and former CEO Bob Chepek’s $32.4 million for the 2021 fiscal year was considered $18.2 million in additional pay. Disney’s fiscal year also ends in September. Chapek’s salary drops to $24 million for the 2022 fiscal year. He left the reins in November, handing over the reins to Bob Iger.

Netflix came in at No. 25 with co-CEOs Reed Hastings and Ted Sarandos earning a combined compensation of $79 million — $64 million of that in additional pay, according to As You So. In Streamer’s case, 77% of reported shares and 73% of institutional shares voted against. (In January, Hastings moved up to executive chairman, and COO Greg Peters was promoted to co-CEO with Sarandos.)

Courtesy: As You Sow

As you sow

The packages of the highest-paid CEOs and the highest-paid are often inflated by alternative grants, the study noted. As WBD and other organizations point out, these may only reflect grant date fair value with no assurance that value will ever materialize. For example, Zaslav’s options require the stock to hit certain levels over a number of years before coming into the money.

However, recurring grants that have vested or cashed out over time are difficult to track. They are not included in a proxy’s original compensation table because they were already calculated when the first award was made

Realized pay, when stocks and options are actually sold or vested, is “historically less visible and more difficult to calculate,” notes You Sow. “Due to the extended bull market, most CEO pay stock awards are worth much more than originally estimated.” Under the new SEC rules, companies must also disclose the full actual, or realized, payment.

One of a host of additions and changes to the formulas the regulator is asking for about salary disclosure. A pay versus performance table requires companies to include the relationship between the compensation paid to the CEO and other named executive officers and the company’s total shareholder return. It must include a company’s total shareholder return versus its peer group.

Back in the rankings

To compile its overpayment list, As You So has consulting firm HIP Investors analyze the financial performance of each S&P 500 company’s five-year total return (total stock gains and losses, plus reinvested dividends).

This year, its report cited Tesla as a case study in what it says are weak links between the company’s stock performance and CEO pay, including a massive, multi-year stock option grant for founder and CEO Elon Musk that could be the subject. A lawsuit in Delaware court.

“Instead of getting Musk to more closely share the vision of Tesla’s shareholders, the awards have funded his purchase of Twitter and his continued alienation from shareholders,” as Yu Soo said, with the stock losing about 65% of its value last year. It has gained ground back this year.

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